CP plans expansion in Vietnam

CP currently has five plants in Vietnam and plans to double that by the year2014. "We want 10 plants in Vietnam by 2014," says Jittisart Jittiloet Sakulchai, the general manager of CP Vietnam Livestock Corporation.

The CP Group, Thailand's largest agricultural conglomerate, has been present in Vietnam since April 1992. The first four plants cost billions of baht to build, but the fifth one is leased.

Mr Jittisart said the cost of all six planned new factories will be less than for the first four due to smaller capacity. "We've earmarked US$37 million for 2012, $60 million for 2013 and $70 million for 2014," he says. That money will see one factory open next year and two each in 2013 and 2014.

"The goal is to have plants in each area of the country," he says. This will allow the company to access raw materials and customers in remote locations more efficiently, reducing transport costs.

The expansion, which is based on the assumption of an imminent surge in demand, will see local animal feed production capacity rise by 17.2% to 17.7 million tonnes annually by 2015.

The CP Group, which manufactures farm, feed and food products, has been gradually expanding all of its Vietnamese operations, as the young population has embarked on a consumption spree.

Mr Jittisart says with feed production such a main focus of the group, the new factories will be made as high-tech as possible. The Binh Duong plant, opened this year, is packed with high technology for fully automated operations.It now operates at 60-70% of its 720,000-tonne annual capacity, and construction of the other new ones will begin soon.

"Once we reach 80% or 90% capacity utilisation, then it's time to start thinking seriously about the next factory, and we'll probably reach that shortly," he says, adding that the next one will open in the North near Hanoi.

Even though some infrastructure problems such as electricity supply have gradually improved, other issues including labour shortages have become important concerns for potential investors.

"Vietnam has cheaper labour than other Asean countries such as Thailand, Malaysia or Singapore. At the moment, we have only four Thai expat staff here, with the rest all locals. However, there is not much skilled labour, and expat workers are expensive," said Mr Jittisart.